Construction, Insolvency and Supply Chain Risk
Paul Daine -International Commercial Debt Recovery Specialist
Specialising in national and international commercial debt recovery with over 35 years of experience in the industry.
The dramatic collapse of Carillion at the start of 2018 raised issues about supply chain dependency and weaknesses in the UK construction sector.
With the addition of high street names, such as Maplin and ToysRUs, the same issues may well be raised in the retail sector.
The Pains for Construction
Recovery rates in the construction are low, and it feels especially vulnerable. Turning a profit is challenging, and increasingly so.
Lenders are cautious and the Carillion collapse is likely to make them more so.
In construction, most of a contractor’s value is in its receivables. When it becomes insolvent mid-project, this wears away at the worth of any of its certified sums and work in progress, reducing the chances of creditors and subcontractors getting paid.
Carillion’s collapse has impacting thousands of creditors, and driven some of its subcontractors into insolvencies of their own.
What Action to Take?
If you are in the supply chain and a major contractor goes under it is vital to act fast.
The quicker your reaction time, the more chance you have of lessening the impact the insolvency will have on your business
Get in touch with the insolvency practitioner to find out what their plans are, because it can make a huge difference to your own survival chances.
For example, if the insolvent business is to carry on trading, with a view to finding a buyer, you may have the opportunity to continue to supply the new owners.
However, if the business is to cease trading, then you need to prepare for a loss of income, and look at any potential damage limitation.
Survival must be your major priority and weathering the storm may mean finding additional sources of finance
You should have the confidence that your business already has sound credit control and debt collection procedures and processes.
You cannot always see a collapse coming, but ensuring you routinely get paid on time will help guard you against the risks associated with supply chains and insolvent contractors.
If you would like to strengthen your credit control and debt collection procedures to protect your business, please contact me.